Weekly Legislative Update August 3, 2020

Senate COVID-19 Bill Expands WOTC

 

Last week, the U.S. Senate released its version of round-two Covid-19 relief. CARES 2.0, officially titled the "American Workers, Families, and Employers Assistance Act," includes a substantial expansion of the Work Opportunity Tax Credit (WOTC).

Unfortunately, CARES 2.0 does NOT include an extension of WOTC beyond 2020.  Hopefully an extension will come later.

The Senate bill proposes to add a new WOTC target group known as "2020 COVID-19 Unemployment Recipients." The definition of a qualified employee would be very simple. The person must have either received (or have been approved to receive) unemployment compensation during the week of their hire date, or the week immediately preceding their hire date.

The tax credit amount for the new target group would max out at $5,000. It would be based on $10,000 of the certified employee's first-year wages. Unlike every other WOTC target group, re-hired and former employees would be eligible.

Also, for this target group only, the bill would dispense with the 25% tax credit rate that's usually applied if the employee works less than 400 hours. The tax credit would be calculated as 50% of qualified wages, as long as the employee works at least 120 hours.

We will continue to update you.

U.S. Department Of Labor Publishes Additional Guidance for Workers, Employers as America Returns to Work

 

The COVID-19 pandemic's economic impact on state Departments of Transportation (DOTs) is unpreceded. Over the last five months, the virus has limited daily commuting and travel and caused widespread economic shortfalls, resulting in a significant drop in fuel tax and toll receipts and creating substantial revenue shortfalls for state DOTs. According to the American Association of State and Highway Transportation Officials (AASHTO), state DOTs are facing revenue losses totaling $37 billion over the next five fiscal years (through FY 2024). 

As a result, state DOTs' ability to carry out their core functions, including capitol construction programs, is threatened. Some state DOTs are delaying and cancelling projects, putting at risk construction jobs and timely realization of economic benefits those projects bring to communities across the Nation. This is even more concerning in northern states, where the construction season is limited and most of the year is not conducive to build. According to data compiled by the American Road & Transportation Builders Association (ARTBA), at least $9 billion of construction work on transportation projects have already been shelved. A sampling of states experiencing project cancellations and significant revenue declines are below.

Congress Must Provide Relief to State DOTs

* Congress must provide an immediate infusion of at least $37 billion in federal funding to state DOTs in order to prevent further disruptions to planned transportation projects and allow state DOT employees and transportation construction workers essential to planning and delivering these projects to remain on the job.

* The funding will also preserve the core capabilities of state DOTs that are critical to implement a robust, bipartisan surface transportation reauthorization bill, which can serve as a platform for national economic recovery and growth.

* Due to the pandemic's economic impact on state DOT revenues, states across the country are pulling back their lettings for public works projects originally scheduled for May, June, July and August - typically the peak of the construction season.

*As the current surface transportation law - the FAST Act - is set to expire on September 30, this funding will also preserve the core capabilities of state DOTs that are critical to implement a robust, bipartisan surface transportation reauthorization bill, which can serve as a platform for national economic recovery and growth.

* At stake are tens of thousands of miles of newly paved roads, hundreds of refurbished bridges, and other vital public works projects that are now in serious jeopardy of being suspended or cancelled altogether.

A Groundswell of Support

* This is a top priority for all sectors within the construction and transportation industry, including over 40 organizations and trade associations joining a letter to the White House and a letter to Congressional leadership requesting this action.

* There is considerable bipartisan support throughout Congress, including a House "Dear Colleague" letter with 137 signatures and a Senate "Dear Colleague" letter with 26 signatures.

A Sampling of Impacted States and Projects

Below is a sampling of states that are experiencing project cancellations, delays or projected revenue declines:

 

Alabama

* State legislature proposing diversion of $100 million in gas tax revenue to boost small businesses

California

* CalTrans planning for $1.8 billion in revenue declines over 4 years

Connecticut

* Expected revenue down $800 million over the next five years

* Greenwich, CT cut $4.9 million in road improvement projects

Florida

* Gov. DeSantis vetoed $37 million in transportation-related projects in the FY20-21 budget

Illinois

* Motor vehicle related revenues down by roughly $50 million

* Mount Prospect, IL reducing spending by $7 million, including delaying projects like bridge repair

Kentucky

* May and June lettings cancelled, totaling $83 million in projects

* Work suspended on over 100 projects totaling $150 million

Louisiana

* State planning for $249 million budget shortfall over the next 15 months

* The state has listed 236 projects highway and bridge projects that could be impacted through FY2021 due to state revenue declines

Maine

* Maine forecasting $128 million decline over next 18 months

Maryland

* Secretary of Transportation reports a Highway Trust Fund revenue decline of approximately $550MM in FY2020

Missouri

* Estimating an awards reduction of $2.6 billion in contractor awards, including no new awards 2021-2023

New York

* NYC capital spending budget reduced by $489 million over next 4 years

* Repair, maintenance and inspection budget reduced by $42 million

North Carolina

* NCDOT facing $300 million budget shortfall

* 100 projects, valued at $1.6 billion, will be delayed

* Greensboro MPO voted to delay $71 million in construction projects

South Carolina

* Forecasting $78 million revenue decline in FY2020, possibly up to $140 million for FY2021

Texas

* Revenues are expected to be down $527 million in FY 2020 and $2.2 billion in FY 2021

Washington

* Port of Seattle voted to cut over $70 million in capital projects due to expected reductions in revenue

West Virginia

* $20 million spring paving program indefinitely postponed

* YTD revenues down $38 million

Wyoming

* State will delay 11 projects, totaling $437.5 million to fill budget shortfall

If you have questions regarding this critical infrastructure need or would like more information on those locally impacted public works projects or businesses in your area, please let us know.

IRS Provides Guidance on Recapturing Excess Employment Tax Credits

 

The Internal Revenue Service issued a temporary regulation and a proposed regulation to reconcile advance payments of refundable employment tax credits and recapture the benefit of these credits when necessary. 

The regulations authorize the assessment of erroneous refunds of the credits paid under both the Families First Coronavirus Response Act (Families First Act) and Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Families First Act generally requires employers with fewer than 500 employees to provide paid sick leave for up to 80 hours and paid family leave for up to 10 weeks if the employee is unable to work or telework due to COVID-19 related reasons. Eligible employers are entitled to fully refundable tax credits to cover the cost of the leave required to be paid.

The CARES Act provides an additional credit for employers experiencing economic hardship due to COVID-19. Eligible employers who pay qualified wages to their employees are entitled to an employee retention credit.

The IRS has revised or is in the process of revising the Form 941, Form 943, Form 944 and Form CT-1, so that employers may use these returns to claim the paid sick and family leave and employee retention credits.

Employers may also receive advance payment of the credits up to the total allowable amounts. The IRS has created Form 7200, Advance Payment of Employer Credits Due To COVID-19, which employers may use to request an advance of the credits. Employers are required to reconcile any advance payments claimed on Form 7200 with total credits claimed and total taxes due on their employment tax returns.

Any refund of these credits paid to a taxpayer that exceeds the amount the taxpayer is allowed is an erroneous refund for which the IRS must seek repayment. 

For more information on the employer credits, see Employer Tax Credits

Labor Department Requests Information On Paid Leave And The Family And Medical Leave Act (FMLA)

 

On July 16 and 17, the Department of Labor (DOL) released two Requests for Information (RFI) seeking feedback and data from stakeholders, such as small businesses, regarding their experience with paid leave and the Family and Medical Leave Act of 1993 (FMLA). Please note that these are two separate requests, and two separate dockets. 

Paid Leave: For purposes of this information collection, paid leave refers to paid family and medical leave to care for family members, or for one's own health. The RFI seeks feedback on a variety of topics, such as how requirements for paid leave would economically impact small businesses, small non-profits, or small governmental jurisdictions with a population of under 50,000. What are the costs and benefits, and are there alternatives that would minimize these impacts? Comments to DOL are due on September 14, 2020.

Family and Medical Leave Act (FMLA): The FMLA entitles eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave for specified family and medical reasons. Covered employers include private sector employers with 50 or more employees in certain circumstances.  DOL is seeking feedback on the definition of a serious health condition, leave taken in an intermittent basis, employee notice for leave, and health care certifications.  The RFI also seeks information regarding specific challenges and best practices that employers experience in administering FMLA leave.  Comments to DOL are due by September 15, 2020.

Read the DOL press 

Access the new DOL FMLA forms: https://www.dol.gov/agencies/whd/fmla/forms

Virginia to Enact Safety Workplace Standards for COVID-19

 

The Virginia Department of Labor and Industry formalized an Emergency Temporary Standard (ETS) that mandates personal protective equipment, sanitation, social distancing, infectious disease preparedness and response plans, recordkeeping, training, and hazard communications in the workplace. While the ETS mandates requirements already applicable to employers through Governor Northam's executive orders, the ETS also has new requirements for employers.

The ETS takes immediate effect on July 27, 2020. The ETS will remain in effect for six months, unless otherwise made permanent.

Covered Employers

The ETS covers every employer in Virginia. The ETS breaks down job tasks and employers by risk category, ranging from very high risk to lower risk. High and very high-risk tasks are reserved for healthcare and mortuary services involving contact with known or suspected COVID-positive persons. Traditional office work tasks are classified as lower risk.

Medium risk job tasks involve certain specialty work, like meat processing, hand labor and commercial transportation, as well as tasks that involve frequent interaction with the public, like grocery stores, retail stores, exercise facilities and restaurants. Employers must conduct an exposure assessment to determine which job tasks performed by their employees fall into which categories.

ETS Requirements

The ETS includes dozens of requirements for all employers, regardless of risk category. Employers must:

-Inform employees about COVID-19, including exposure risks and symptoms;

-Develop policies for employees to report symptoms and return to work;

-Establish a notification system for other employees when they learn of a positive test;

-Conduct an exposure assessment of all workplaces and classifying each job task according to the exposure hazards;

-Enforce face mask requirements;

-Close or control access to common areas, and sanitize common areas daily;

-Ensure employees observe physical distancing on the job and during paid breaks;

-Provide easy and frequent access to handwashing and hand sanitizer;

-Barr employees known or suspected to be positive for COVID-19 from returning to work for at least three days after symptoms subside, at least 10 days after they were first diagnosed, or until they test negative twice;

-Notify Virginia Department of Labor and Industry (DOLI) if three or more employees test positive within the same 14-day period;

-Ensure that paid leave policies are flexible and consistent with public health guidance and that employees are aware of these policies;

-Ensure compliance with respiratory protection when multiple employees are occupying a vehicle for work purposes.

If an employee tests positive for COVID-19, the employer is required, within 24 hours, to:

- Inform employees who may have had contact with employee that tested positive; and

- Contact Virginia Department of Health.

The ETS also requires additional engineering and administrative controls to be implemented depending on the job task or hazard's exposure risk level.

Required Plans, Policies, and Training

Very high and high-risk employers must develop and implement a written Infectious Disease Preparedness and Response Plan ("Plan"). Medium risk employers with 11 or more employees must also develop and implement a Plan. These employers must develop and train employees on the Plan by September 25, 2020 (60 days after the effective date of the ETS). The Plan must include infection prevention methods, contingency plans in the event of an outbreak, and address the various controls in place for different job tasks.

Medium to very high-risk employers must provide training to employees by August 26, 2020 (30 days after the effective date of ETS). The training must cover the requirements of the ETS, characteristics of COVID-19 disease transmission, COVID-19 signs and symptoms, risk factors for severe illness based on underlying health conditions, the possibility for pre-symptomatic or asymptomatic spread, and safe and healthy work practices. It must also address personal protective equipment, the employer's Plan, and the anti-discrimination requirements of the ETS.

Lower risk employers do not have to provide formal training, but must distribute information to employees about hazards and characteristics of COVID-19. DOLI intends to release an information sheet that employers may use to comply with this requirement.

Anti-Discrimination and Anti-Retaliation Provisions

The ETS prohibits employers from:

- Discriminating against or firing an employee because that employee voluntarily provides and wears their own PPE, if such equipment is not provided by the employer, as long as that PPE does not create an increased hazard; and

- Retaliating against or firing an employee who has raised a reasonable concern about COVID-19 infection control to the employer, the employer's agent, other employees, or a government agency, or to the public through print, online, social, or any other media.

Conclusion

The DOLI has posted on its website the final text of the ETS, and various other resource documents for employers:

https://www.doli.virginia.gov/covid-19-outreach-education-and-training/

https://www.doli.virginia.gov/conronavirus-covid-19-faqs/

https://www.doli.virginia.gov/vosh-programs/coronavirus-covid-19-resources/

IRS Issues Proposed Regulations for TCJA's Simplified Tax Accounting Rules for Small Businesses

 

The Internal Revenue Service last week, issued proposed regulations proposed regulations updating various tax accounting regulations to adopt the simplified tax accounting rules for small businesses under the Tax Cuts and Jobs Act (TCJA).

For tax years beginning in 2019 and 2020, these simplified tax accounting rules apply for taxpayers having inflation-adjusted average annual gross receipts of $26 million or less (known as the gross receipts test).

Taxpayers classified as tax shelters cannot use the simplified rules even if they would meet the gross receipts test.

Prior to the TCJA, certain taxpayers could determine whether they were eligible to figure taxable income under the cash method of accounting by meeting a different gross receipts test.  That gross receipts test was met if the taxpayer's average annual gross receipts for all prior taxable years did not exceed $5 million. 

After the TCJA, a taxpayer meets the gross receipts test and can use the cash method if average annual gross receipts for the three-taxable year period ending immediately before the current taxable year are $25 million (adjusted for inflation) or less.

The TCJA also exempted taxpayers meeting the gross receipts test from the uniform capitalization rules.  Tax reform also added an exception to the requirement to use an inventory method if their inventory is treated as non-incidental materials and supplies, or in accordance with the applicable financial statement (AFS).  If they do not have an AFS, taxpayers can use their books and records. The proposed regulations issued today implement these statutory changes and provide clarifying definitions.

The proposed regulations issued today also provide guidance for small businesses with long-term construction contracts and the requirements for exemption from the percentage-of-completion method and the uniform capitalization rules. For taxpayers with income from long-term contracts reported under the percentage-of-completion method, guidance is provided for applying the look-back method after repeal of the corporate alternative minimum tax and enactment of the base erosion and anti-abuse tax (BEAT).

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.